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Is Pro-Worker Good Business

October 1, 1996
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Today’s workers: poor, tired, huddled masses. They work on the production lines for long, exhausting shifts, murmuring amongst their own in a flutter of foreign languages. Many are first-generation Italians, Germans, Greeks. The rest have migrated to the cities only recently, leaving their farm work behind for more trying, less rewarding labor. These employees just want to punch in, do their time and leave. Luckily the government is watching out to make sure they can do just that. Workers must be protected from their employers —corporate sharks constantly searching for a chance to exploit these innocents.

Oh, wait, this isn’t the 1930s anymore, is it? It’s the 1990s, and workers’ education levels have risen threefold. Fewer work on the factory floor. More work in positions that were scarce or nonexistent in the past 60 years: customer-service reps, account execs, computer engineers. They’re eager to learn, anxious to get involved. Workers of the ’30s kept their hands busy because their jobs depended on the number of widgets they produced. Workers of the ’90s keep their heads busy because they’re judged on the ideas they produce.

At least that’s the U.S. government’s message. To be competitive in a global economy, we need employees who can think and do for themselves, who thrive on teamwork, who have a satisfying work/life balance. You hear the message from the floors of Congress to the podium of President Bill Clinton’s State of the Union address.

And yet, doesn’t it seem that the new employee-employer relationship is shackled by an old, outdated group of labor laws? Every time HR tries to get creative, it runs smack into a wall of legislation. The problem stems from the fact that, although government has changed its mindset about what the successful workplace looks like, it hasn’t changed its mind that employees are simpletons in need of protection from evil employers. "Most of our labor laws were written in the ’30s and ’40s and are based on the assumption that employers and employees always have divergent interests, that they can’t really cooperatively make decisions," says Sandy Boyd, co-chair of the Flexible Employment, Compensation and Scheduling Coalition (FLECS) in Washington, D.C. "That’s why you have these laws that don’t allow employees to make choices. There’s the assumption that if you’re the employee, you check your brain at the door. We’ve passed that period. [Government] is urging us to pass that period: Be more flexible, be more family-friendly. Well, we can’t really do that."

It’s frustrating, both for employers and employees. But things will have to change. If we’re going to evolve into businesses of the 21st century, we’re going to have to be governed by laws of the 21st century.

FLSA: Restricting flexibility.
In the 1930s, when most jobs were on the factory floor, flexibility in workplace and hours wasn’t possible. It’s different today. You want to offer more of your employees telecommuting options. Problem is, you’re not totally sure who is and who isn’t exempt, and you can’t very well let nonexempt employees head home where you can’t tally their hours.

You want to start a program that places top managers side-by-side with line managers for a substantial period of time. But you’re not sure if that would eliminate the top managers’ exempt status. And, you want to initiate compressed workweeks. However, your nonexempt employees wouldn’t be able to participate in a nine-day/80-hour schedule, because that means one week they’d work more than 40 hours and you’d have to pay them overtime. The law doesn’t allow them to just waive the pay, even if they’ll be getting a day off the next week.

You want to offer more flexibility in general, but the Fair Labor Standards Act (FLSA), created in 1938, won’t let you. The FLSA, as it currently stands, has several deficiencies that can wreak havoc in progressive workplaces. One problem area, as described in the scenarios above, is the exempt/nonexempt classification and the inability for nonexempt employees to waive overtime in exchange for more flexibility. For one thing, the classifications are outdated. The salary requirements for exempts in the private sector haven’t been revised since 1975, which leaves HR professionals with meaningless guidelines that allow exempt status to be triggered at $250 a week—that’s an annual salary hovering at the poverty level. Some guidelines for computer positions were tacked on several years ago, but with that booming industry, these also seem stale.

"It’s difficult to sit down with those regulations and look at your workforce and figure out who’s entitled to overtime and who’s not," says FLECS’ Boyd. "It’s probably the No. 1 problem in the wage/ hour division. That’s an area we would like to see updated, but there hasn’t been any legislation on that yet."

We’ve all been slotting employees into exempt or nonexempt positions without such updating, so what does it matter? A lot, says Boyd. "It ends up [damaging] flexibility programs," she says. "If you knew for sure which employees were exempt, you might be more inclined to offer telecommuting to certain employees because you wouldn’t have to worry about keeping track of hours worked and where. But if you’re not sure, and you think there might be an overtime liability, you might not offer the program at all. The same goes with flexible schedules like 9/80 compressed workweeks. If you’re concerned about the effect on employee morale by offering it to your exempts and not your non-exempts, you might not offer it at all."

And if you do offer flexibility, you do so with little ease. Newark, New Jersey-based Prudential wants to allow employees whose jobs are compatible with flexible work arrangements to take advantage of such arrangements—from compressed workweeks to alternative work schedules. But, says John Teehan, personnel policies consultant, the recordkeeping requirements are egregious: "We’re trying to be flexible and meet employees’ needs, but then we’ve got the government saying, ‘You’ve got to know exactly when they’re in and not in, when they take breaks, when they have lunch.’"

On top of all that, having the legislation sends the wrong message. "There’s really a lack of flexibility on how creative you can be with your nonexempt employees," says Boyd. "It sets up an unfortunate and unnecessary caste system, in effect."

Laura Janusik, recruitment manager for Digital Directory Assistance Inc. in Bethesda, Maryland, believes the lack of flexibility is ironic this election year. "I think we’re getting back to a generation that’s putting much more emphasis on free time and family life. With that type of philosophy, it’s easier to accommodate an employee with flexible scheduling. But that’s not really permissible with the FLSA. Family values are such a big election-year issue, but unless government redoes the regulations, it’s denying employers the opportunity to jump on that bandwagon and support it."

This may change if the comp-time bill, which passed the House in August and at press time was pending in the Senate, becomes law. The bill would allow nonexempt employees to bank overtime at time-and-a-half in a comp-time bank for future use. Boyd supports the idea not only because it allows employers more room to work with employees on flexible scheduling, but also because it announces a shift in attitude. It concedes that employees, for the first time under the FLSA, are able to choose how they’d like to be compensated for overtime, and acknowledges that employers and employees may work cooperatively to find a plan that best fits them.

Family values are such a big election-year issue, but unless government redoes the regulations, employers [can't] support it.

Employees seem to like the idea, according to a survey conducted by New York City- and Washington, D.C-based Penn + Schoen Associates Inc. Seventy-five percent of more than 800 respondents said they favored the proposal of allowing them to choose; 57% said they’d take the time off.

Still, says Teehan, it’s far from perfect. Nonexempt employees still must receive comp time at time-and-a-half, no maneuvering allowed there. "You’re trying to have management provide flexibility to employees, but then they get hammered if they do," he says. "They have to run a business, so while they’re trying to provide flexibility, they have to look at the bottom line." A look at the bottom line will remind most that flexibility comes with a time-and-a-half price tag.

What should happen in the long run? Janusik echoes the desire of other forward-thinking HR professionals: She’d like government to extend its credo of innocent until proven guilty to employers. "The assumption when the FLSA was written was that the employer is bad. I’d like to see that reversed. I’m not Pollyanna enough to think every employer out there is fair, so I understand the need for regulations. But I think it ties the hands of fair employers. There needs to be a mechanism that would allow employers more flexibility if they can demonstrate a willingness of employees and a benefit for both the employees and employers."

The TEAM Act: Employee involvement gets vetoed.
Back in the 1930s, some employers kept their workforces from unionization by forming bogus company unions. The Big Boss would pick a group of employees, call them a union, and then "bargain" with that phony union. The result: Management maintains the status quo. The Wagner Act, passed in 1935, put an end to this by creating a broad prohibition against employers working with groups of nonunion employees if the employees discuss terms and conditions of employment. As many legal professionals read it, even two employees count as an illegal, employer-dominated group if they discuss workplace problems with management in an effort to resolve the issue. Section 8(a)(2) of the National Labor Relations Act (NLRA) prohibits such discussion in a nonunion setting.

The law is taxing, to say the least, in today’s business setting in which 75% of all employers and 96% of large employers have incorporated employee involvement (EI) into their workplaces. At least a dozen companies, from Polaroid to DuPont, have been forced by the National Labor Relations Board (NLRB) to cease-and-desist their employee-involvement projects (the NLRB can’t levy fines). The legality of EI practices has been doubtful since 1993, when the NLRB ruled that employee committees at Electromation Inc. were actually employer- dominated labor organizations and therefore illegal. Since then, employers have felt they’re on shaky ground as companies continued to fall under NLRB rulings.

The bipartisan TEAM Act (Teamwork for Employees And Managers) was businesses’ bright hope that this would all change. The Act, passed by the House in September 1995 and the Senate in July 1996, would have amended the NLRA, making it legal for an employer to "establish, assist, maintain or participate in any organization in which employees participate to address matters of mutual interest." Basically, it would allow companies to let their employees truly make a difference.

Clinton vetoed the TEAM Act in August, and with Congress lacking the votes to over-ride the veto, the TEAM Act goes to rest until next year. What does that mean to HR? "It’s confusing to HR folks in terms of whether their employee involvement and use of teams is in fact legal," says Chuck Nielson, vice president of HR at Texas Instruments (TI) in Dallas. "[At TI], we’ve emphasized for our whole history that we don’t obey just the letter of the law but the spirit of the law. My employees naturally are asking me whether what we’re doing is legal."

It’s truly a tough call. In Clinton’s explanation of his veto, he writes: "Current law provides for a wide variety of cooperative workplace efforts. It permits employers to work with employees in quality circles to improve quality, efficiency and productivity. Current law also allows employers to delegate significant managerial responsibilities to employee work teams, sponsor brainstorming sessions and solicit employee suggestions and criticisms."

Veto leaves employers in a quandary.
To avoid violation of the law, the AFL-CIO has suggested that companies using EI should allow committee members to be elected by coworkers, rather than selected by management. But some labor lawyers disagree that employee-participation programs are illegal at all. Basically, no one really is sure. Clinton himself has conceded that "recent NLRB decisions have created uncertainty as to the scope of permissible cooperation. " And there’s the rub: It’s a bit difficult to promote full-throttle teamwork when you’re not sure where the legal boundaries are.

Further frustrating pro-TEAMers is what they believe is the Clinton Administration’s slap in the face to business: Congress approved the bill. More than 600 CEOs across America wrote to Clinton in support of the bill. The TEAMwork for America Initiative, a coalition of more than 250 businesses and professional associations, has supported the TEAM Act. Both Clinton and Vice President Al Gore have proliferated pro-team rhetoric in speeches ranging from their 1992 campaign manifesto to the 1996 State of the Union address.

So why a veto? "Because of total union pressure," says Jeff McGuiness, president of Washington, D.C.-based Labor Policy Association, an organization of more than 230 HR officers interested in federal employment-policy issues. "It’s pure, absolute politics. Here you have a Secretary of Labor [Robert Reich] who for four years [encouraged] employee cooperation and then recommended a veto. I think in his case it’s just totally dishonest intellectually."

The message going out 85% of the U.S. workforce is that the Administration doesn't believe they're capable of making decisions.

Talk to anti-TEAM people and you’ll of course, hear another story. They believe the current law gives enough leeway for employee involvement and that the TEAM Act peels away employees’ protections. Employers that have horrible working conditions will avoid unionization by setting up mock employee teams—a repeat of the ’30s situation. Unlikely, counters McGuiness. "The law is very clear that company unions are illegal under current law, and they’d still be illegal under the TEAM Act. It was a bogus argument they used to defeat it. The unions are terrified that workers would start speaking for themselves and not through a union. But the way the workplace is going and education levels have risen, that’s going to happen [anyway]."

The worst thing about the veto, many TEAM proponents say, is the tone it sets toward the vast majority of U.S. employees who aren’t in unions: That they must be protected. "What I’m afraid the message going out to 85% of the U.S. workforce is that the Administration doesn’t have enough respect for them to believe they’re capable of making decisions," says Nielson. "I think that’s too bad."

This is particularly unfortunate in view of current employee attitudes: A national survey sponsored by the federal Dunlop Commission found that workers prefer employee involvement over unions by a three-to-one margin. Nielson recalls a TI employee’s testimony to Congress on what her job was like before and after teaming: "She said, ‘The difference is that I used to make things and now I make decisions. Even better, the people I work with have enough respect for me to think I’m capable of making decisions.’ That’s pretty powerful stuff."

So what now? Most companies are forging—albeit cautiously—ahead. At nonunion Suburban Water Systems, a workforce of 100 in Covina, California, employee involvement has influenced everything from performance reviews to company operations. Last year, Suburban won the Management Innovation Award from the National Association of Water Companies for "building a common vision through employee involvement." Says Rick Hagar, HR manager: "Employee involvement has become a fairly integral part of our HR strategy. It’s sort of spooky that the president is gun-shy." Yet, worker involvement will continue at Suburban, as it will at Texas Instruments, a company celebrated for its employee work teams. Nielson will be part of the 1997 effort to push the TEAM Act back through Congress and to the president—whomever he may be. "I think in 1934, when you talked about teams, they were something you took time out from your job to do and then went back to work," he says. "Teams are the way we do work now. They’re integrated into every single thing we do at every level of the company. Teaming is here and we’re going to do it,"—law or no law.

That sounds suspiciously like an acknowledgment of cooperation between employees and employers to better the workplace—a very 1990s sentiment. Let's hope somebody's listening.

Personnel Journal, October 1996, Vol. 75, No. 10, pp. 66-74.

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